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Okay, is it just me or the question has got confusing wordings?
Because I thought that the drop in FV is worth 0.7m, on top of that, there is a ECL that has to be recorded on the remaining 5.3m amount!I understand how it is to be treated, my question is WHY is it done that we add in case of FAs and deduct in case of FLs?
What Parag said is in FLs, Transaction Cost is deducted to calculate the net amount to be paid to the creditor. If I issue a bond worth $100 @ 5% (implicit rate is also the same) redeemable at par in 1 year and transaction cost is $10, why would the net liability turn out to be $90? I need to pay the bond holder $105 at the year end. Why would the bond not be recorded at $100?
Okay, but as per what I understand, loss allowance is like a provision which is supposed to be created against the Assets. Then why is here a gain in Fair Value of the asset being shown as Loss Allowance?
My deepest gratitude to sir John Moffat without whom, passing AFM would’ve just been a dream. Thank You so much sir!
Passed with 67%.
On to SBR now.Exactly. If the share premium is being used to pay the loan immediately, then how would it appear on the balance sheet?
I’ll rephrase the question, I realised that I messed up.
The creditor will agree for a reduction in his loan by 140m and would be issued 70m newly issued $1 shares, valued at $2.
How would it change the balance sheet?How would the share premium increase If new shares worth $1 are being issued, valued at $2 and we haven’t physically received any cash?
Okay, thank you sir.
Also, I was unable to understand the sensitivity analysis for IRR.
Could you please be able to explain in brief?Hi sir, if we want to perform sensitivity analysis on Costs, will we follow the same procedure as we did in Sales?
Variable Costs * (1 – t)?Oh okay! The question always specify like this whenever a OTC Option is asked to use right?
Sir, could you please explain it in case of sensitivity to Tax Rate? This is not related to the question but in general a doubt!
Why is tax adjusted with depreciation while calculating the sensitivity to Tax Rate?If we have to calculate the sensitivity of the Sales Revenue then why do we need to subtract tax?
2) So in a restructuring question, we should always make the SOFP just after the restructuring until mentioned otherwise?
3) In your 3rd reply at https://opentuition.com/topic/chrysos-jun-17/ , you said that the depreciation is relevant. Why is it relevant? If it is, why haven’t then we adjusted the interest payments in SOFP?
Also, about the perpetuity formula.
Sir when we have calculated the perpetuity, we took the CFs year 1 onwards. Then why haven’t we discounted the obtained value to Present Value?Alright sir, got it. How can I not confuse myself in understanding that the SOPL and SOFP are to be made immediately or after one year? I’ve did the same mistake in a lot of questions!
If they are being made just after the restructuring, then why has the examiner depreciated the new machinery?
Another doubt I developed while going through the answer is, are we making the SOFP and SOPL just after the restructuring or 1 year after?
Bcs in the answer, we have added the value of 1200m (Additional equipment) in Current Assets, and depreciated the “Additional Equipment” while making the SOPL (that gives a hint that we’re making a forecast of SOFP and SOPL).
But in the SOPL, we’ve taken the past year figures of Sales Revenue and Operational costs. I’m confused over this. How can we use past year Sales Revenue while forecasting for next year?
